Paul Ferraresi

An associate of ours, Kim Barmann, in New Mexico sent this report. I wanted to share it with you to emphasize the importance of staying vigilant in saving money.

$ People Are Saving Less

• The Commerce Department reports that Americans are saving at the lowest rate since the Great Depression.
• Personal savings stood at a national level of negative $6.2 million in January.
• About 40% of Americans say they are saving nothing for retirement. One reason: Over the past year, inflation rose 4.3% while salaries rose only 3.4%.
• One in four Americans told the Employee Benefit Research Institute that they have no saving at all.

$ Retirement Is Coming Later and Later

• The percentage of Americans 55 or older working full-time increased from 54.2% in 1993 to 64.4% in 2005.
• Nearly one in four people between 65 and 74 was still in the labor force in 2006, compared with just one in five in 2000.
• A recent study indicates that 17% of workers have suffered a reduction of retirement benefits offered by their employers in the last two years. Of these, only one-third say they are saving more for their retirement as a result.

$ Student Debt Is Piling Up

• Tuition cost have climbed 60% since 2000, and the average graduating senior now owes more than $20,000, according to the National Center for Education Statistics-twice as much as graduates owed a decade ago.
• Nearly a quarter of recent grads owe in excess of $25,000.
• While student debt rose 8% from 2005 to 2006, starting salaries rose only 4%.

These are the statistics. Break away from the crowd and do NOT be one of the statistics. Call us if you want to stand out from the crowd.

What if you could retire early and still get full retirement benefits?? It is not a new concept but many people do not know about it.

The current Social Security system allows individuals to claim reduced, early retirement benefits beginning at age 62. Individuals who wait until their full retirement age to collect receive about 30% more in monthly benefits. If they wait until age 70 to collect, their benefits will be about 60% larger than at age 62. So what should you suggest your clients do?

Assuming a normal life expectancy and using the interest rate on government bonds, the actuarial present value of lifetime benefits are the same for those taking early retirement as for those waiting to take benefits at a later age. Of course, if one’s life expectancy is not normal (due to illness or bad luck or particularly good genes or good luck) one retirement age will look more attractive than another.

Look at going for the best of both worlds: retire at age 62, then pay back and reapply for Social Security benefits at age 70 if you come to regret your early decision.

A couple claimed their Social Security benefits at age 62 and now they each receive reduced benefit of $13,250 annually (in 2008 dollars). If they had waited until their normal retirement age (65) to collect benefits, the couple would each receive $18,928 a year. If they waited until 70 (this year) to apply, their benefit in 2008 would have been $20,693, thanks to the delayed benefit credit.

If they choose to pay back the Social Security benefits they have received over the past eight years, they will each receive the much higher benefit for the rest of their lives. If they take this option, each would repay $94,556 to Social Security. They would then each begin receiving $20,693 a year (the same as if they had waited until age 70 to begin receiving benefits); and as a result, they would have approximately 56% more in real Social Security benefits every year for the rest of their lives. “Essentially, the government has given them an interest-free loan.”

Many people think their retirement will consist of a leisurely life of traveling or playing golf after picking up their gold watch.

Soon to be retirees have many questions to address before showing up for their last day. First off will be when you retire. It will make a major difference in the amount of money you’ll actually have in retirement. Most people fall into the trap of taking Social Security too soon.

Data from the Bureau of Labor Statistics show Americans are increasingly taking early retirement. In the 1950’s the average retirement age was 67.6 years old. By the 1960’s the age dropped to 64.6 and by the 1990’s it dropped to 62.6.

It appears, according to a study by NEFE, those with combined pre-retirement income of $30,000 to $100,000 have NOT planned adequately for their retirement. With to much debt, not enough money saved and few plans for how they will decumulate their funds it is a time bomb ready to explode.

The key is more education and a desire to be self sufficient. Looking at the above statistics on retirement age I reflected that in the 1960’s the average person did retire around age 65. (This was mandated by the government as the “official” retirement age). Most workers died about 7-8 years after retirement with their spouse surviving about another 10 years. Their pension and Social Security made it a somewhat “comfortable” retirement. Today, the life expectancy for a healthy 65 year old male is near age 85. The surviving spouse is expected to live into their early 90’s. Wouldn’t it make sense for people to work to say age 78 or so? Then, following the above formula for the worker would live 7-8 years after retirement and still have a “comfortable” retirement. Isn’t that what is happening as you go to many stores and see countless senior citizens happily working?

This would solve all the financial problems for Social Security, keep people active and productive, and, provide society with dedicated hard working employees. The activity would keep people fit, possibly stop them from deteriorating mentally and physically and take a strain off our country’s medical facilities. Ah yes, as George Burns said “If I knew I was going to live this long I would have taken better care of myself.”

The response I get from most people on the above idea…. Paul, I hate my job and just want to get out. My response…. Who chose that job and why not get out now. “Well, I need the great pay and benefits” My response…. You have complained for 10 years saying the same thing. Why didn’t you set up a side business 10 years ago so you could walk away today.” Ten years from now you will probably say the same thing again, so, why not start to make changes now?

Ah yes, discipline or regret.

Life is like a marathon race. Many ups and downs. Pain from each step we take, yet, euphoria as we pass each marker. As you run and try to reach your goals for this year… why not sprint???

I find reading books helps one reach insights. Doug Andrew, author of many best selling books can help you “sprint” to financial independence. I am a trained advisor on Doug’s team and suggest a basic book from his collection…..

________THE______________________________________________

LAST CHANCE MILLIONAIRE

IT’S NOT TOO LATE TO BECOME WEALTHY by Douglas R. Andrew

 PRE – PAY YOUR MORTGAGE
 SOCK AWAY AS MUCH MONEY AS YOU CAN IN YOUR 401K!
 DIVERSIFY YOUR PORTFOLIO!

THAT’S THE GUARANTEED WAY TO A SAFE AND SECURE RETIREMENT!

BUT IS IT?

For the millions of Baby Boomers facing retirement, here is a brilliant – and refreshing contrarian – guide to accumulating wealth and security regardless of age, income, or current assets.

According to Doug Andrew, the bestselling author of MISSED FORTUNE 101, too many Americans are being led down the wrong financial path. Even worse, many Baby Boomers find themselves panicking – fearful that they’ve already fallen too far behind to ever catch up.

In this indispensable and eye-opening guide, Andrew provides fresh new pathways to reaching financial security – pathways that all Americans need to consider now. Centering on his Three Miracles of Wealth Accumulation: the Miracle of Compound Interest, the Miracle of Tax-Favored Accumulation, and the Miracle of Positive, Safe Leverage, Andrew explodes many of the commonly-held myths about 401ks, pensions, paying down one’s mortgage, and other forms of retirement planning. Along the way, Andrew offers unique strategies that will not only increase your wealth, but also help readers enjoy their best years while securing their future.

 Douglas R. Andrew’s first hardcover, Missed Fortune 101 (0-446-57657-3), was published by Warner Business Books in 2005 and has sold in excess of 500,000 copies.

 With an estimated 83 million Baby Boomers approaching retirement, books that focus on financial security are perennial bestsellers, as demonstrated by the blockbuster success of the #1 New York Times bestselling Rich Dad series by Robert T. Kiyosaki.

 Americans are perpetually striving to join the millionaire’s club, as evidenced by the continuing success of The Millionaire Next Door (Longstreet Press, 1996), which has sold more than two million combines copies.

Doug Andrew’s initial books Missed Fortune, Missed Fortune 101 and Millionaire by Thirty are other ones you need to read.

If you want more information email me at founders@foundersgroup.net or call 713-871-5919.

Despite recent studies that paint a rosy picture of how well baby boomers are prepared for retirement, a study from Barclays Global Investors paints a gloomier scenario. Some of the results, which will be published in full in the fall issue of The Journal of Investing, are being released in Barclays’ InvestmentInsights.

The authors, who say optimistic conclusions for the retirement health of baby boomers are based on erroneous assumptions, have titled their analysis as a warning- The Future Shock of Retirement. Jonathan Cohen, Barclays Global Investors senior fixed income strategist; Matthew H. Scanlan, head of American institutional business; and Matthew O’Hara, head of securitized credit research, say changes are needed by government, employers and individuals to avert a retirement crisis.

They say errors in some recent studies occur because the researchers assume current costs and benefits will remain stable in the future. Instead, “current benefit levels (for Social Security and Medicare) are unsustainable,” the authors say. “Today, 6.9% of federal income taxes go toward the two programs. By 2020, as much as 26.6% of all federal income taxes would be required to sustain current Social Security and Medicare benefits for the greatly expanded retiree population.”

Defined contribution (DC) pension plans now outnumber defined benefit (DB) plans, a trend that won’t be reversed, and “DC plans typically fail to address longevity and inflation risk.” At the same time, pre-retirees are saving less than they were 10 and 20 years ago and less than people in countries such as Germany and Japan save now.

The wealthiest top half of pre-retirees “look reasonably well prepared for retirement under current conditions, but are highly sensitive to future changes,” the trio concludes.

(From Financial Advisor Magazine, June 2008)